Many business owners get by with a little help from their friends. Bank of America explored how they feel about it.
- Small business owners rely on friends and family for social, financial and sometimes even operational support.
- A 2016 survey found that more than half of respondents relied on family in important business roles, both formal and informal.
- That reliance is not one way – communities rely on small businesses to fulfill unique local needs, and small businesses rely on their communities to thrive.
Small business owners need a lot of support to succeed, whether it's financial, operational or emotional. One of the most important sources of that support for many entrepreneurs is their network of friends and family members. People are social creatures, and many entrepreneurs face the rigors of the business world either alone or with a small staff of dedicated employees. Friends and family provide that support system that can help entrepreneurs face stress, balance work and play, and generally keep a sense of perspective even amid the stress and responsibility of starting and maintaining a successful business in an often unfeeling marketplace.
Bank of America's Small Business Owner Report, based on a semiannual survey of 1,000 small business owners across the country, found that more than half (53%) of the respondents rely on family to serve important business roles, like advisors, employees, investors and partners. Additionally, 38% of the entrepreneurs surveyed have received a financial gift or loan from family and/or friends at some point to fund their business, and 35% said that friends and family help them the most with running their business.
"We know small business owners are inherent self-starters making significant personal sacrifices on behalf of their businesses, but what's fascinating is this dimension of family, friends and community that they see as core to their success," Sharon Miller, head of small business at Bank of America, said in a statement.
According to the report, here's how small business owners viewed the support they received from their personal connections. For business entrepreneurs, family and friends are a lifeline when times get tough and a resource pool for skilled jobs when times are good. Gratitude, emotional connection and financial support from the community weave a web of connection that help small businesses, families and community members find stability and connection. The 2016 survey found:
1. Most small business owners who borrow from family or friends feel grateful. Sixty-six percent of entrepreneurs who used funding from family and/or friends to help with their business said that they feel grateful for that support or appreciate it. Respondents reported other emotions related to borrowing from friends and family, including anxiety or pressure to pay it back (30%), happy or optimistic (27%), and awkward or embarrassed (23%).
"We didn't see signs of reluctance or payback guilt among the 38% of small business owners who said they've received financial support from family or friends for their business. In fact, very few actually said they felt awkward or embarrassed about it," Miller said. Of those surveyed, a vast majority had no regret about asking their loved ones to invest in their business. Miller added, "Perhaps that's because nearly three-quarters intend to pay it back."
Owners of newer small businesses –businesses less than five years old at the time of the survey – were not only more optimistic than their more established peers, but they were also more likely to receive financial support from family and friends (34%, compared to only 18% of both growing and well-established businesses).
2. Small business owners rely on family for support beyond financing. Emotional support can be just as important to a small business owner as financial support. The stresses that come along with building and growing a business can't always be solved with money. Fifty-seven percent of respondents said that they rely on family and friends for emotional support. Volunteering and providing business referrals are other nonfinancial ways that friends and family can support a small business owner.
"Beyond investments in the business, 13% of small business owners say their family or spouse financially supports them with personal expenses such as buying groceries or clothing," Miller said.
3. Small business owners and local communities rely on each other. According to the survey, nearly two-thirds of small business owners report that residents in their community actively support small business, with nearly 50% saying their local community plays an important role in the success of their individual enterprise. To show their appreciation, 67% of small business owners surveyed reported that they support charitable or nonprofit organizations in their community.
Be the support a small business needs
"A strong tie to the community and the support of local business is important to many small business owners," Miller said. A survey by Guidant Financial of small business entrepreneurs in 2020 found that around 10% were still using funding from family and friends as a source of capital.
The ties that bind us as family, friends and communities enrich our lives and strengthen our social bonds. They also throw a lifeline to small businesses working in the era of big box stores and online marketing. Community ties and support between local businesses can help entrepreneurship thrive as we enter a new decade in the 21st century.
Small businesses need the input and support of their communities to thrive. To be that community for the small businesses you use, do what you can to make a difference for them. Consider skipping the big Black Friday rushes during the holiday season, and, instead, support your local businesses on Small Business Saturday. More importantly, remember them for everyday shopping in your community. Like small businesses on your social media feeds, follow their work, share their posts and comment back when you see something you like. Be a good community steward of local businesses, and you'll continue to have access to the diversity of products and service offerings they provide.